FFP: whole new ball game

Financial Fair Play is helping to cure European football’s budgetary incontinence – and this means more work for lawyers.

A panel session at next month’s Global Law Summit – Sports governing bodies: keeping to the rules of the game – will consider Financial Fair Play (FFP) in football.

Many will have seen how English clubs have been affected, most notably Manchester City. It reached a settlement with European governing body UEFA involving a fine of €20m, with a further €40m suspended; limits on spending in the transfer market last summer; limits on Champions League squad size; and a reduction in acceptable deviations on future FFP losses.

The Football League, meanwhile, last month imposed a transfer ban on Leeds United, Nottingham Forest and Blackburn Rovers for breaches of their domestic version of FFP.

The impact of FFP has been felt across Europe. Part of UEFA’s benchmarking report aggregates the profits and losses of all the teams in the top-flight professional leagues of the association’s 53 members. In 2010, the losses were nearly €1.6bn and in 2011 almost €1.7bn.

While a large proportion of these losses was covered by benefactors and owners, almost a quarter was not. Put simply, the ‘beautiful game’ was haemorrhaging millions every year and, some might say, needed saving from itself.

Is FFP working? Well, the benchmarking report for 2012 showed aggregate losses of just over €1bn – an improvement of 36% in one year. And with a continued positive trend expected for 2013, the signs are good.

I expect the panel also to debate whether FFP has the effect of keeping the biggest clubs in the ascendant and whether they have been properly sanctioned. Some would say the size of the fines and range of sanctions show the association has done so; others would note the lack of expulsions, perhaps showing it has not. And there still remains the so-called Striani complaint, a challenge brought through the European court by a Belgian agent. While many doubt if this has legs, only time will tell.

It should be noted too that the breakeven criterion is just part of FFP. The other key aspect is the overdue payables (that is, paying your debts as they fall due).

Imagine a club going to its bank and asking for a multi-million-euro loan, without offering any security, at a 5% interest rate, with the ability to use that loan to speculate on players and pay the debt back when it wanted over several years.

No bank would agree to those terms. Yet many clubs buy players from their rivals and do not pay the transfer fees, training compensation or solidarity payments. Instead they wait until the selling/training clubs have pursued them through FIFA and the Court of Arbitration for Sport. Only then, when facing further disciplinary action, do they either pay or usually agree a repayment schedule with the other club.

Once again, the object of FFP in these circumstances is to create a level playing field and punish such behaviour. Has it worked? UEFA’s report reveals that in three years overdue payables fell from €57m to €9m for clubs seeking entry to European competitions.

Perhaps the other big positive to be taken from FFP is the fact that most members of UEFA now have their own domestic version. Whether ours works will become clearer in time.

There will always be a search for loopholes, but simply putting the FFP regulations on the table at least stopped the rot. And one thing is for sure – the new regulations are creating work for lawyers.

Mark Hovellis a partner at Mills & Reeve in Manchester

On 23-25 February, the business and legal worlds will descend on London for a one-off international event. The summit will showcase the role of UK law in international resolution and help develop business for members. As well as the opportunity to hear from international thought leaders, delegates will benefit from exclusive social and networking opportunities.